What is the interest saving in EMI by transfer of home loan to another bank?

The exact reduction in EMI varies based upon

Existing rate of interest being charged by your bank

Outstanding principal amount

Your current EMI

Rate of interest currently available from new bank

What are the benefits of transferring house loan to a new bank?

Reduction in interest rate from high rate to as low as 9.10% per annum

Reduction in monthly EMI by upto 5% depending upon the rate difference, balance tenure and EMI

Option to avail top up loan at same rate as home loan rate (9.10% to 9.6%) subject eligibility conditions and loan to value

What are the home loan balance transfer charges?

Various costs and fees associated with transferring a loan vary from case to case and from state to state. Main charges and fees that you just factor in the calculation of savings are:

Foreclosure charges payable to existing bank in case of fixed rate home loans. No charges are payable in case of floating rate home loans

Processing fees and administrative fees of new bank. These may range from a flat fee of say, Rs. 10,000 to upto 1% of the loan amount. However, banks offer discounts on fees from time to time and you must check the offers available in the market with MyLoanCare

Incidental charges such as SRO registration payable in Mumbai, Pune and other parts of Maharashtra

What is the process for home loan takeover?

Follow the below simple steps to transfer your loan:

Check your current rate and calculate interest savings

Calculate the estimated cost on account of various fees and charges as given above

Shortlist new bank that you wish to transfer your loan to; decide if you want top up loan or not

Obtain list of property documents deposited with your existing bank (in case this is not available with you already) and foreclosure letter from existing bank

Apply for loan with new bank with photocopy of property documents as per list of property documents with existing bank

Obtain sanction letter and execute new loan agreement

Take disbursement from new bank by way of cheque/ demand draft in favour existing bank and deposit the same with existing bank

Obtain property documents from old bank and deposit with new bank

What are the precautions to be taken when transferring home loan?

Check interest rate track record of the new lender

You must check that the lower interest rate being advertised by the new lender is real and not a shot term gimmick. Please ask your loan advisor for the benchmark rate track record of the new lender.

Satisfy yourself about service quality of the new lender

Check that the service quality offered by the new bank you are choosing is up to your expectations. Lower rate should not come at the cost of inferior service.

Check the benchmark rate

There are two commonly used benchmark rates for home loans – base rate and prime lending rate. Base rate benchmarked loans are known to be more transparent and hence preferable over prime lending rate benchmarked loans.

Is the spread variable or fixed

Interest rate on floating rate loans consists of two parts – benchmark rate and spread above it. While the benchmark rate is expected to change over time, the spread is supposed to remain constant except in case of a default. However, some banks offer floating rate loan with both the benchmark and the spread being variable. In case of many such loans, borrowers see their loan interest rates rise sharply after a few months. So, avoid loans with variable spreads and instead opt for floating rate loans that vary interest rate only with change in the benchmark rate.

Estimate transaction cost

Check the cost that you will incur for effecting the change. These include processing fees, stamp duty (in some states like Maharashtra) and documentation charges.

Issue notice to existing bank

Some banks insist on a prior notice before you can prepay your home loan. Check your loan agreement carefully and ensure that due notice is given to or waived by your existing bank.

Are there any additional precautions when availing home loan balance transfer on under construction property?

In case the property whose loan you are transferring is still under construction by the builder, some additional points must be taken care of:

>Check loan eligibility as per new bank

Cost of property consists of multiple heads such as basic price, preferred location charge (PLC), external development charges, internal development charges, security deposit, electrification charges, power back-up charges, service tax, fire fighting charges etc. Norms for inclusion of each cost head differ across lenders. In case your chosen new bank does not include some of the heads in the cost of property which were included by the old bank, the loan eligibility may come down and you may need to increase your own contribution.

Select the right time to do the loan transfer

The process of loan transfer may take 10-15 days from the date of application and your existing bank may typically take another 10-20 days to handover property documents to the new bank. You will not be able to avail further loan disbursements during this period. Hence, it is important you time the transfer of your loan at a time when you don’t expect any fresh demand from the builder for the next month or so.

Get fresh Permission to Mortgage and Tri-partite agreement

our builder will need to issue a fresh permission to mortgage (PTM) to the new bank and enter into a new permission to mortgage. This typically takes no more than 2-5 days but borrowers must check with the builder.
In summary, balance transfer is beneficial to borrowers as it helps reduce cost of borrowing significantly. Home buyers and home loan borrowers must exercise caution in the process of balance transfer so that the process is smooth.

CRISIL, a leading credit rating agency, has kept a positive outlook on home loan securitization in the post demonetisation market scenario. Mortgage backed securities with their long tenures and low delinquency rates are expected to continue attracting long term investors. Volumes in mortgage backed securities have already touched Rs. 19,000 crore in first half of 2016-17, significantly higher than the annual volumes of Rs. 15,000 crore registered in 2014-15.

JM Financial Products, a subsidiary of JM Financial Limited, has completed an acquisition of 24.5 percent stake in India Home Loan Limited. The company has acquired 1,500,000 shares through preferential allotment route. India Home Loan provides home loan to individuals and families in the affordable housing segment.

05th Dec 16 IDFC Bank reduces its home loan rates by 10 basis points

IDFC Bank has reduced its simple home loan rate by 10 bps to 9.15 percent from 9.25 percent earlier. Revised short and sweet home loan rate has been reduced to 9.30 percent from 9.40 percent earlier. Home loan rate of IDFC Bank depends on six month MCLR rate which currently stands at 9 percent. The rates are effective from 1st December, 2016.

01st Dec 16 Government plans to launch a home loan scheme for first time borrowers in the upcoming Union Budget 2017

Government and RBI are working jointly to launch a new home loan scheme for first time borrowers. Under the proposed scheme, first time borrowers availing home loan of up to Rs 50 lacs might be able to avail home loan at low interest rates in the range of 6 to 7 percent. The scheme is proposed to be announced in the upcoming Union Budget 2017 scheduled on 1st February, 2017.

27th Nov 16 Demonetisation raises hope of cheaper home loans

Even as the secondary market for houses and developer-built small properties has come to a standstill, banks expect stability to be restored in the property market once home loan interest rates get reduced. Demonetisation is expected to bring in more deposits to banks and give them flexibility in reducing interest rates on various loan products.

*My Finance Care Advisors Pvt. Ltd., or https://www.myloancare.in is a bank neutral multi bank platform that helps borrowers and bank customers compare loans and deposits of all banks in India at one place. Information carried at this website is based on perusal of public sources and should not be construed as an offer or solicitation or invitation to borrow or lend. The Company does not assure as to the correctness of information carried at the website. Lenders/ banks/ other parties may contact us at info@myloancare.in to provide corrections or updates. We may act as and/ or be associated with channel partners of banks and other sellers of financial products.